The payment industry is experiencing exponential changes. This is largely as a result of technological advancements, changing business needs, and reshaping of regulatory environment across the globe.
As consumers move away from a cash economy and favor to card and e-payment transactions, there are a number of trends emerging across the global payments landscape. Among them are:
• Increased debit card usage
• Declining check usage
• Focus on mobile and e-payments for innovation
• An ever-changing regulatory environment
As a direct result of these global trends, others are reshaping the payments industry from one continent to another, as the industry addresses inevitable change. These include:
• Increasing investment in improving the payments infrastructure
• Launch of innovative product/service offerings
• Rising fraud concerns
• Cross-regional impact of regulations.
The catalysts behind these trans-geographic
The catalyst behind these trans- geographic changes include customers, technology, and regulations.
However, any key focus area might vary from region to region.
Africa is witnessing an increased number of innovative payment products and services, with a rapid growth in adoption of mobile payments. A large unbanked population and significantly high share of small ticket transactions are the main drivers behind these trends in the region.
The Asia-Pacific region is likely to witness an increase in;
2. Number of payment options.
3. And reach of prepaid cards.
Also, credit card penetration and remittances are expected to increase in coming years, with regulators playing an increasingly important role.
A cultural shift in Latin America is driving the growth of person-to-person (P2P) payments, credit cards, e-payment enablers, and government-added incentives, leading to an increase in non-cash usage.
Globally, mobile and e-payments are emerging as alternatives for traditional payment instruments. This has leading to an increased collaboration between banks and non-banks for mobile payments infrastructure and hybrid and innovative solutions. As banks also realize the importance of innovation in the payments industry, they are offering new innovations.
The remaining part of this blog post examines two key technology trends on which the payments industry is focused:
1. Implementing payment hubs in an effort to build flexible payments capabilities
2. Adoption of next generation delivery models
Implementing Payment Hubs to Build Flexible Payments Capabilities
Changing customer preferences remained the core reason behind changing business needs. By utilizing new technologies, innovative offerings by non-banking firms are posing a risk to banks of customer erosion.
Growth of non-traditional payment services, such as P2P payments and mobile payments, are creating the need for support and integration within the payment infrastructures of banks. New regulations and initiatives also require adaptable capabilities and flexibility among banking payment systems.
With the current payment engines and infrastructure used by banks do not meet today’s requirements in terms of functionality, capacity, and flexibility. This has led to a serious need for a flexible yet robust systems which can accommodate growing risk and liquidity capabilities.
An increasing number of banks are looking to implement payment services hubs in an effort to minimize payment silos while remaining flexible to changing business needs. Banks may, however, choose to adopt an incremental implementation strategy instead of replacing the existing systems at once.
The key drivers behind the increased focus on implementation of payment services hubs are:
• Heightened focus on reducing costs to improve profits
• Retaining and enhancing revenue
• Improving risk and liquidity management
Rising Adoption of Next Generation Delivery Models
Most financial institutions are saddled with aging payment solutions, which do not offer the flexibility to meet today’s new business requirements.
Financial institutions are at risk of losing out to new entrants in the market, which primarily use the latest technology to cater to increasing and changing customer preferences.
To that end, financial service institutions are focusing on adopting solutions which can provide the flexibility needed to change in tandem with business needs.
Next generation delivery models—such SaaS, cloud computing, outsourcing and co-sourcing—provide such flexibility. SaaS and cloud computing offer a midway point between payment services hubs and full-blown outsourcing.
Although cloud-based solutions are associated with security concerns, interest in SaaS and cloud computing is expected to grow, as increased adoption and technological advancements are likely to largely mitigate security issues.
Pressure on budgets, coupled with a need to improve technology to continue operating, has created an imperative need for solutions that fix the problem. We see this as the key driver in the adoption of next generation models.
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